Industry Trends and Challenges
The automotive aftermarket is a significant sector of the U.S. and European economies and is rapidly growing in importance in emerging markets like China.
This industry encompasses all products and services purchased for light, medium and heavy duty vehicles after the original sale, including replacement aftermarket parts, accessories, lubricants, appearance products, tires, collision repairs as well as the tools and equipment necessary to make the repair.
According to AAIA, overall aftermarket and aftermarket parts sales in the US totaled almost $286 billion in 2010, representing a 4.2% increase over the previous year.
Automotive Aftermarkets in the US – A Tale of Two Highways
After mixed success in 2011-12 for the comeback of new car sales in the US, 2013 is shaping up to be a positive year with good gains for the auto industry as consumer demand for new vehicles is on the rise.
On the plus side…
- Recovery in light vehicle sales – return to pre-recession levels by 2015?
- Continued aging of the parc
- Longer vehicle retention time – invest in vehicle performance
- Scrappage rates declining
- Improving dealer profitability
On the negative side…
- Decline in driving miles
- Potential increase in gas prices at the pump
- Model proliferation – thousands more SKUs
- Channel consolidation (some winners and some losers)
- Low cost country (LCC) imports – competition intensifies
US automotive aftermarket leadership must sharpen their growth and supply chain strategies to both enhance profitable growth opportunities and improve margins through integrated global supply chain strategies and action plans that…
- Synchronize product supply with demand and (with excellent supply chain visibility) streamline the flow of goods while increasing inventory turns and customer service
- Enhance supply chain efficiency and effectiveness through transformational demand-driven supply chain and S&OP processes to meet the multi-channel demands of today’s marketplace
- Provide the best technology and processes to help customers deal with increasing parts complexity
- Leverage low-cost country manufacturing where appropriate and move to a strategic sourcing model
- Maintain agility to adapt to industry and customer changes
The Chinese Automotive Aftermarket – A Long and Winding Road
China’s aftermarket will be strongest in the world over the next 5-10 years, based on both new vehicle sales and an aging parc. As a result, the repair market is forecasted to grow 21% per annum.
On the plus side…
- Strong and steady demand growth
- Fragmented competitive environment (no dominant players/brands)
- Fluid supply chain structure offers multiple options to participate
- Increasing market order
- Development of car culture
On the negative side…
- Price competitive with margin stress along much of the value chain
- Unstructured/fragmented distribution
- Weak appreciation of branding
- Fragmenting model base with limited scale for most vehicle groups
- Counterfeits and corruption
Success in China’s aftermarket will result from a combination of a well-structured growth strategy supported by strong, local operational capabilities. Key areas for management to consider are:
- Identifying attractive addressable markets where the value proposition is strong and the potential for profitable growth exists
- Establishing an effective route to market, sorting through the current distribution maze
- Developing a strong brand which has customer pull
- Building supply chain competencies that yield competitive advantage
- Establishing a strong local management team
Tompkins focuses on end-to-end supply chain solutions in the automotive aftermarket industry, with offices in North America, Europe, and Asia. Learn more about how Tompkins can help you.
More From Tompkins
How to Contact Us
Want to get in touch with Tompkins International? Click here to see how to contact us.
How Can Tompkins Help?